Have you ever wondered where the best places to buy property are? Today I am going to tell you what the 3 most profitable towns and cities are for buy-to-let investors! What you need is the highest possible rental income for the least possible investment, which is what I call the ‘rent to house price ratio’.
If I was to say to you that you’re going to get £300 of cash flow from a property that cost you £300,000, that’s not very exciting. But if I was to say to you, you’re going to get £300 of cash flow from a property that cost you £100,000… now that starts to get quite exciting and its all about this ‘rent to house price ratio’.
You might be thinking are there even houses out there for £100,000 or less? Can you really get one of those and rent those out? You absolutely can and there are plenty of areas that I’ve been buying and my clients have been buying right now where you get this rent to house price ratio right.
The ‘rent to house price ratio’ is one of the key things that you need to have at the table, there are 4 key profit levers to make yourself financially free and two of these are cash flow and capital growth (the property going up in value over time).
Right now, we’re in a period where house prices are rising faster than they have over the last 6 to 10 years. So, we have house price growth going on which is where you can invest your money and within 12 to 18 months you can have double the money that you put in – if you buy the right investment properties!
If you’re wondering “well that sounds great but these properties are hard to find”, well keep reading. At the start of my property journey, my original investment of 10 properties was disastrous but I am going to teach you exactly how to not make the mistakes that I made at the beginning.
So, how do you make sure you get great capital growth?
Well what you need to do is learn to study the market. We need to do some studying to understand what’s going on, history will show us what’s going to happen in the future. You must learn to think forward and see several moves in front of you. Yet, many of you in property are just stepping out without even thinking about the next step.
You may be wondering; well how do I know what these patterns are? Well, you can look at the land registry data. You all know that houses go up in value over time, but have you ever studied the land registry data and have you looked at some examples to inspire you to acknowledge that this really works? Let me show you!
This land registry graph below is the average house price growth since 1968. This data includes every house sale that happens and gets registered with the land registry, there can be no other accurate data!
As you can see the house price has risen from just £3595 to £250,341 in just 50 years – that is multiple doubling decade, after decade, after decade!
Time in the market makes you money, you need to be in the market as soon as you possible can. When was the best time to buy a property? 10 years ago! When is the second best time to buy it? Right now! We want to get the benefits of the cash flow and the capital growth now.
If you buy in one of the 3 most profitable towns and cities, you buy the right houses, on the right streets in the right areas you get this capital growth. After this you’re able to use one of the other profit levers which is the ability to refinance a property and take money back out of it. You can use this money to keep growing your portfolio or you can take that money out tax-free and you can spend it on a holiday or a car or you can quit your job and live off it! This is the reason why people invest in property, this is why people don’t want just 1 or 2 or even 3 houses, they want 8, 9 or 10 so it can be a life changing experience.
So, if we want to make sure we’re buying the right houses in the right areas we need to understand the property market, how it moves, what is growing and when.
Let’s walk you though step by step so you can read the market and understand how it works.
The first place house prices rise in the UK is London (they also go flat first and drop first).
Next, it washes out to the outer metropolitan; for example if London goes up this year then the outer metropolitan might go up next year.
It will then further wash out to the South East and then it starts to go down to the South West. By the time we’re getting to the South West its also creeping up the motorway network and we might be starting to hit the Midlands.
So, when London prices start to go up, I know that within 2 or 3 years the Midlands is going to be rising and so is the South West but it’s not going to rise the same year that London starts to rise. Equally when it starts to fall in London, in 2 or 3 years later the Midlands will be falling.
From there, it washes out even further. The prices start to rise up to Liverpool, Manchester, Leeds and Hull.
Eventually it will end up in the North East and North West.
So, this means that if London doubles in value over a 10 year period. Then places like Birmingham or Nottingham or Derby will also double over a 10-year period but they will start 3 years later than London.
Now you understand this pattern of house prices, its time for the information you have been waiting for!
Where are the most profitable towns and cities this year? Where are you going to get the best house to price ratio?
Right now, as part of what we do at The Insight Group we source people over 500 properties each and every year. We know where is going up and we know where to be buying and there’s approximately 40 areas on our key list of where we would happily invest our clients money. Now I am going to share 3 of our top ones with you!
Now when people first hear Middlesbrough, they think of car manufacturing and a very industrial type of place. But Middleborough provides a brilliant rent-to-house price ratio, great cash flow and capital growth. It even grows just the same as London does percentage wise!
Rotherham in South Yorkshire… when I say this people always say ‘really?!’ as without knocking Rotherham in any way in the last 10 years it was in the press for all the wrong reasons but again it has a fantastic rent to house price ratio and brilliant capital growth.
Blackpool is usually connected to holidays and holiday homes, not necessarily family homes but it’s great for the house to price ratio and capital growth.
Now these are my top 3 cities and towns to buy in right now but don’t go rush off and go “right I am going to make a purchase in Blackpool!” because in every city and town there’s good and bad areas to buy. Its not just as simple as buying a property in Blackpool, or Rotherham or Middlesbrough.
Stop for a moment, as you need to learn the rest of these patterns, strategies and rules to make sure you buy the right properties. For example: if you buy one of the wrong properties in Blackpool, it might make you £2000 a year and that’s ok but if you buy the right property in Blackpool that meets all of the profit levers it could make you £7800 a year for the rest of your life! That’s a quadruple return because you took the time to buy the right one rather than the wrong one. I am sure you would agree this is a life changing difference!
Author: Aran Curry